You applied for a loan and the lender came back with a question you were not expecting. There is a UCC filing against your business. What is that and why does it matter?
Or maybe you did not get that question. Maybe the lender just quietly declined and moved on, and the UCC filing was part of the reason without anyone telling you.
Either way, understanding what UCC filings are, how they get there, and what to do about them is basic business owner knowledge that most people never get until it causes them a problem.
What a UCC Filing Actually Is
UCC stands for Uniform Commercial Code. A UCC filing, formally called a UCC-1 Financing Statement, is a public notice that a lender or creditor has a security interest in some or all of your business assets. When a lender files a UCC-1 against your business, they are essentially staking a legal claim on your assets as collateral for a debt you owe them.
These filings are public record. Anyone can search them. And lenders always do before approving a new loan, because they want to know what claims already exist on your assets before they agree to lend against them.
A UCC filing does not mean you did anything wrong. It does not mean you are in default. It is simply a recorded lien that says this creditor has a legal interest in these assets until the debt is paid.
How UCC Filings Get There
UCC filings show up from several sources and not all of them are obvious.
- Equipment financing. When you finance a piece of equipment, the lender almost always files a UCC-1 against that specific equipment. This is standard and expected. The filing covers the equipment until the loan is paid off.
- SBA loans. SBA lenders file a blanket UCC lien covering all business assets as part of standard loan documentation. If you have an SBA loan, you have a UCC filing.
- Lines of credit. Many bank lines of credit are secured with a UCC filing against business assets or receivables.
- Merchant cash advances. This is the one that surprises people most. MCA companies almost always file a blanket UCC-1 against all business assets and receivables the moment you take an advance. Every single one. If you have taken multiple MCAs, you may have multiple UCC filings stacked on top of each other.
- Vendor agreements. Some suppliers and vendors file UCC liens as part of credit arrangements. Many business owners do not realize this happened.
- Factoring companies. If you have ever factored your receivables, the factoring company almost certainly filed a UCC lien against your accounts receivable.
Why UCC Filings Cause Problems with New Lenders
When a new lender is considering a loan, they search UCC filings to understand who else has a claim on your assets. The problem is priority. In a default situation, secured creditors are paid in the order their liens were filed. First in, first paid. A new lender coming in after existing UCC filings may find themselves in a junior position, meaning if things go wrong they might not get paid at all.
This is why a stack of MCA filings is such a red flag to conventional lenders. It is not just that you have MCA debt. It is that multiple creditors have already claimed all of your assets as collateral, and a new lender would be at the back of a very long line.
| Type of UCC Filing | What It Covers | Impact on New Financing |
|---|---|---|
| Specific asset lien (equipment, vehicle) | Only the named asset | Low impact, new lender just avoids that asset as collateral |
| Blanket lien on all assets | Every business asset including receivables, inventory, equipment | High impact, new lender has nothing unencumbered to lend against |
| Receivables lien | All current and future accounts receivable | Blocks invoice financing and lines of credit secured by receivables |
| MCA blanket lien | All assets and future receivables | Major obstacle, signals distress and blocks most conventional lending |
A Real Example of How This Plays Out
Marcus owns a mid-sized trucking company. Over three years he took four separate MCAs to cover cash flow gaps during slow freight seasons. Each MCA company filed a blanket UCC lien when they funded him. He paid all four advances off over time. Business improved. He decided to apply for a $400,000 SBA loan to buy two new trucks.
The SBA lender ran a UCC search and found four active blanket liens on his business. Marcus was confused because he had paid all the MCAs off. But he had never requested termination of the UCC filings when he paid them off, and the MCA companies had not filed terminations on their own.
On paper, four creditors still had legal claims on every asset his business owned. The SBA lender could not get a first lien position, which is required for SBA financing. The loan was on hold until Marcus tracked down all four MCA companies, confirmed the balances were paid, and got termination statements filed for each one. That process took six weeks and nearly cost him the deal.
One More Thing Nobody Warns You About
UCC filings are public record. Which means anyone can search them. And MCA companies do – constantly.
There is an entire industry built around buying and selling UCC filing lists. The moment you take an MCA and a lien gets filed against your business, you are on a list. If you take two or three, you are on more lists. And those lists get marketed to every MCA funder and broker who wants to sell you another advance.
What that means in practice is your phone starts ringing. A lot. Unsolicited calls from people offering you capital, telling you you’re pre-approved, asking if you need cash for your business. Some of them are aggressive. Some of them are persistent. All of them found you the same way – your UCC filings told them you have taken advances before, which makes you a warm lead in their world.
It is worth knowing this is happening and why. If you are getting hammered with MCA solicitation calls, it is not a coincidence. You are on the list. The only way off it is to stop being an active MCA borrower and let enough time pass that you age out of the active search results.
How to Search for UCC Filings Against Your Business
This is something every business owner should do at least once a year and definitely before applying for any financing.
- UCC filings are maintained by the Secretary of State in the state where your business is registered. Most states have a free online search tool on the Secretary of State website.
- Search your business legal name and any variations. Also search your own name personally if you have signed personal guarantees, as some filings are indexed under the individual guarantor.
- The search results will show every active UCC filing, who filed it, when it was filed, and when it expires. UCC filings are valid for five years and can be renewed.
- If you find filings you do not recognize, that is worth investigating. Some filings are from vendors or creditors you may have forgotten about. Occasionally there are erroneous filings that need to be disputed.
How to Get Rid of a UCC Filing
This depends on the situation.
If the debt is paid off, the creditor is required to file a UCC-3 Termination Statement within 20 days of your written request. You write to them, confirm the debt is satisfied, and request the termination filing. Most creditors will do this. Some drag their feet. If they do not comply within the required timeframe, you have legal remedies.
If the debt is still active, the UCC filing stays until the debt is paid. You can sometimes negotiate a partial release if the lien covers specific assets and you want to use those assets as collateral for a different purpose. This requires the lienholder’s cooperation and is more common in larger structured deals than in MCA situations.
If the filing is erroneous or the creditor cannot be located, you can file a UCC-3 Amendment to dispute it or in some cases file your own correction with documentation. This process varies by state and can be complicated. An attorney who handles commercial transactions can help if you run into resistance.
If you are refinancing MCA debt into a conventional loan, the new lender will typically require all existing UCC liens to be terminated as a condition of funding. The payoff proceeds from the new loan go to retire the MCA balances, and the MCA companies file terminations simultaneously at closing. This is standard and your closing attorney or the lender’s counsel coordinates it.
What to Do Before You Apply for Financing
- Run a UCC search on your business right now. Know what is out there before a lender finds it and you are caught off guard.
- For any paid-off debts with active UCC filings, request termination statements immediately. Do not wait until you are in a loan application to discover a stale lien is blocking you.
- Make a list of every active UCC filing, what it covers, and who holds it. This is part of understanding your actual debt picture before you walk into any financing conversation.
- If you have MCA debt with active blanket liens, understand that conventional financing will require those to be cleared, either through payoff or as part of a refinance transaction.
The Bottom Line
UCC filings are a normal part of business financing. Having them does not mean something is wrong. Not knowing about them and not managing them is where the problems start.
A clean UCC picture, meaning active liens only for current obligations and terminations filed for everything paid off, makes your business significantly more attractive to new lenders and removes one of the most common friction points in the loan approval process.
If you want help understanding what is on your UCC record and what it means for your financing options, that is exactly the kind of thing we look at before we ever submit an application. Let’s talk.
